Respuesta :
Decrease the excess reserves of member banks and thus decrease the money supply
If the board of governors of the federal reserve system increases the reserve requirement, this change will decrease the excess reserves of member banks and thus decrease the money supply.
What is money supply?
The money supply is the money in circulation in the county, state, or city. The increase and decrease of the money supply directly impact the state of inflation and deflation in the economy. Apart from this the money supply indirectly influences the employment and ultimately the GDP of a country or region. The money supply of a country is generally controlled by the central bank of that country.
If the board of governors of the federal reserve system increases the reserve requirement, this change will decrease the excess reserves of member banks and thus decrease the money supply.
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